Grifols makes an unexpected turn for investors in the final stretch of the year. The blood products company seeks at all costs to get rid of the 26% stake it owns in Shanghai Raas. It depends on this agreement to meet its objective of reducing debt and close the next year with a debt ratio of four times the EBITDA, compared to the 6.7 times registered in September, up to 9,540 million. However, the appearance of a new suitor may delay this operation, which the Catalan group promised to execute before this year.
Without ruling out the entry of new bidders in the bidding, this potential buyer is China Merchants, a state-owned company dependent on the Chinese Ministry of Transport with which it would have started talks to transfer this asset after negotiations with China Resources have stalled, according to ‘Bloomberg’ has advanced, which also states that the pact could be closed in the coming weeks. The question is whether this operation will be formalized before the end of 2023 or will ultimately end up being extended until 2024, with which it aims to raise $1.5 billion that will be used exclusively to reduce leverage.
“There is only one month left until the end of the year, so there are doubts about whether this change will give time to close the transaction in December,” comments Renta 4 analyst, Álvaro Arístegui. In fact, experts who follow the value are suspicious of this last-minute movement. Charles Pitman, of Barclays, argues that the new potential buyer “poses a greater risk both for the timing of the announcement and for the possible valuation.” In this sense, he is skeptical about the possibility of the sale being formalized before December 31, so if an agreement is reached ‘in extremis’, Pitman believes that the titles could skyrocket between 15% and 20%.
The acquisition would have a direct impact on the Grifols Diagnostics division, since Shanghai Raas has a 45% stake in the North American-based subsidiary of the group founded by Josep Antoni Grifols i Roig. With a capitalization of around 6.7 billion euros, the aforementioned Raas has registered a revaluation of close to 20% so far this year, so Grifols’ share in the company is valued at just under 1.8 billion euros after the rebound of the 4.4% that it has experienced as a result of this turn of events.
Grifols’ behavior has been somewhat more diffuse in the last four sessions, in which it has registered a mixed tone, with falls of less than 2% between Tuesday and Wednesday. This situation coincides in time with the stock market punishment suffered by one of its main competitors: Argenx. The Belgian group suffered a collapse of more than 10% last Tuesday after admitting problems in its trial to treat chronic idiopathic demyelinating polyneuropathy (CIDP) and that if successful it could harm Grifols.
“The failure of the trial is unexpected, because the company had increased its size to improve the chances of success,” they point out from ‘Bloomberg Intelligence’. Since last July, the company has experienced a resurrection on the stock market that has led it to move at historical highs, exceeding 490 euros per share. After the last setback, it corrected more than 17%, although in the annual calculation the comeback reaches 24%.
This trajectory contrasts with that experienced by Grifols, which in the last month has appreciated more than 22% and appears as the second stock that has run the most in November behind Cellnex Telecom (+26%). Two highly indebted securities but in which the market has placed a vote of confidence after the pause in interest rates and under the promise of undertaking divestments. In this sense, Grifols closed this Thursday slightly below 13 euros per share, with which it is once again close to the annual maximum of 14.3 euros that it marked just before the entry of Thomas Glanzmann as president, replacing Steven F Mayer.
After the execution of a cost savings plan, which has included layoffs, and the putting aside of the Grífols family at the top, channeling all executive power to Glanzmann, the company is heading to close a year full of changes with a twelve-month potential of around 38% and with the horrible number of analysts in its favor, since more than seven out of ten recommend purchase. In this regard, its target price at the moment is 17.9 euros which, if confirmed, would place it at its highest since the beginning of July 2022, just before the ECB began to increase financing. “We hope that the strong momentum in the stock market continues,” says Patricia Cifuentes, Bestinver analyst.
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